A term sheet is a document that sets out the terms and conditions under which an investor will invest in a business. This is usually a startup company. It outlines the main terms and conditions of the investment deal and guides the preparation of the final agreement.
Outline the key financial terms and other terms of a proposed investment using this term sheet template. Investors use a term sheet as a basis for drafting investment documents. The term sheet is not intended to be legally binding, with the exception of certain clauses, commonly those dealing with confidentiality, exclusivity and sometimes costs.
It is crucial that the founders of a company understand what they're signing up to beyond just the valuation and investment amount, as they will have to live with these terms and in certain cases, convince their fellow shareholders to accept them also.